Executives have laid out details of US Airways’ proposal
for a combined airline to some members of the unsecured
creditors committee and gotten a positive reception, said the
people, who declined to be identified because the terms aren’t
public. The goal would be to complete a merger before American
parent AMR Corp. (AMR) exits Chapter 11, the people said yesterday.

US Airways has been making the overtures as American works
toward its stated target of leaving court protection as an
independent airline. Tempe, Arizona-based US Airways has said it
learned the value of labor and creditor backing after its
hostile bid for Delta Air Lines Inc. (DAL) collapsed in 2007.

“This is all part of the bigger plan to win the hearts and
minds of the major stakeholders of AMR,” Hunter Keay, a Wolfe
Trahan & Co. analyst in New York, said today in an interview.
“There’s probably a lot of fear and uncertainty among the
unsecured creditors committee right now and they are exploring
their options.”

AMR remains focused on its own plan “to achieve revenue
growth and a highly competitive cost and debt structure,” a
spokesman, Andy Backover, said in a statement. A US Airways
spokesman, Todd Lehmacher, said the airline had no comment.

Shares, Bonds

US Airways rose 3 percent to $7.55 at the close in New
York. AMR’s 9 percent notes due September 2016 jumped 11.75
cents to 42.75 cents on the dollar at 9:54 a.m., according to
Trace, the bond-price reporting system of the Financial Industry
Regulatory Authority.

US Airways Chief Executive Officer Doug Parker has
acknowledged hiring advisers to weigh a bid for Fort Worth,
Texas-based AMR, and he told reporters in Phoenix on March 21
that the review probably will continue “for quite some time.”

AMR, which filed for Chapter 11 on Nov. 29, won U.S.
Bankruptcy Court approval yesterday to extend its sole right to
file a reorganization plan until Sept. 28, from the end of
March. Nothing bars potential suitors from talking with the
nine-member creditors panel or other parties in the bankruptcy.

Bankruptcy Judge Sean Lane’s order allows the creditors
committee to seek to shorten that period and requires the
airline to show why it should remain in place.

‘Leverage Pendulum’

“The leverage pendulum has swung fairly decisively toward
US Airways if the company should choose to come to AMR’s labor
groups with alternatives to what’s probably going to be fairly
draconian cuts,” said Wolfe Trahan’s Keay. “Creditors suddenly
have a lot of leverage because of that conditional provision for
exclusivity.”

Tom Hoban, a spokesman for the Allied Pilots Association,
said that if the union couldn’t reach a consensual labor
agreement with AMR as the carrier seeks to rework contracts, the
group might be willing to work with new management brought in as
the result of a merger.

“We’ll consider all options on the table,” Hoban said in
a March 21 interview. “Whether that means another suitor that’s
capable of bargaining effectively, I don’t know. That scenario
hasn’t presented itself yet.”

Strained Relations

Labor relations at the third-biggest U.S. airline have been
a flash point after more than five years of talks failed to
produce new contracts before AMR’s bankruptcy. The largest part
of American’s Feb. 1 plan for $2 billion in cost reductions will
come from labor: $1.25 billion, including 13,000 job cuts.

The airline told Judge Lane in Manhattan yesterday it would
seek authority next week to void existing union contracts and
impose new terms if talks don’t produce money-saving agreements
by then to help end annual losses that began in 2008.

US Airways is the fifth-biggest U.S. airline, and made its
bid for Delta, then No. 3, while the larger carrier was in
bankruptcy in 2006. The effort crumbled in less than three
months when Delta’s creditors endorsed its plan to stay
independent.

Delta, now the second-largest U.S. airline, and private-
equity group TPG also are assessing potential bids for AMR,
people familiar with the matter said in January.